CHAPTER 12

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					    CHAPTER 12.   FISCAL CLOSEOUT OF MODERNIZATION PROGRAMS

12-1.      INTRODUCTION. This Chapter provides instructions on the
        fiscal closeout of modernization programs that are
        completed or being terminated because of poor performance
        or other reasons. Program completion means that all
        authorized CIAP costs have been fully paid and no further
        CIAP funds will be expended for that particular
        modernization program.

12-2.      FINAL BUDGET REVISIONS. When a modernization program is
        nearing completion, the PHA shall consult with the Field
        Office regarding the need for any final budget revisions.

12-3.      PHA SUBMISSION OF FINAL, QUARTERLY REPORT AND ACTUAL
        MODERNIZATION COST CERTIFICATE. Upon completion or
        termination of a modernization program, the PHA shall
        submit to the Field Office, Attention: Chief, Assisted
        Housing Management Branch (AHMB), Form HUD-52826,
        Schedule/Report of Modernization Expenditures, and Form
        HUD-53001, Actual Modernization Cost Certificate (AMCC), as
        explained below:

        a.   "Final" Quarterly Report. The PHA shall submit the
             quarterly report, marked "final", in an original and
             two copies.

        b.   AMCC. The PHA shall submit the AMCC in an original
             and one copy. A completed sample of the AMCC is
             attached as Appendix 21. Instructions for preparation
             of the form are contained on the reverse side of the
             form.

12-4.      HUD REVIEW. Upon receipt of the required documents, the
        Field Office shall review the documents as follows:

        a.   The amounts on the "final" quarterly report and the
             AMCC must agree as to funds approved, advanced, and
             expended (see funding limitation in paragraph 10-10).

*            b.   The amount of funds approved and advanced must agree
             with Departmental records, as contained in the Rapid
             Housing Payment System (RHPS).                       *

        c.   If the "final" quarterly report and the AMCC indicate
             that excess funds have been provided to the PHA, the
             Field Office shall direct the PHA to remit immediately
             the excess funds, without waiting for the audit, and
             then subsequently to submit a revised "final"

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             quarterly report and AMCC, showing that total funds
             advanced, obligated and expended are equal amounts.
             If the audit of the AMCC shows that the PHA
             overremitted funds, HUD will return the amount of the
             overremittance to the PHA.

*            d.   In addition, refer to paragraphs 10-17b regarding
             final inspections of completed construction contracts
             and modernization programs. Where there were equal
             opportunity-related physical or management
             improvements, the HMS shall forward the "final"
             quarterly report to the FHEO Division for review to
             ensure that such improvements were carried out in an
             acceptable manner.                                    *

12-5.      AUDIT VERIFICATION OF ACTUAL MODERNIZATION COST
        CERTIFICATE. When the submitted documents are correct, the
        HMS shall prepare a letter for the signature of the Field
        Office Manager or designee to the PHA, advising that the
        AMCC must be included as a financial statement in the next
        regularly scheduled fiscal audit conducted by the
        Independent Auditor (IA). The audit shall follow the
        requirements of 24 CFR Part 44 (Single Audit Act of 1984
        (31 U.S.C. 7501-7507)). HUD reserves the right to conduct
        audits.

12-6.      HUD APPROVAL OF ACTUAL MODERNIZATION COST CERTIFICATE.
        Upon acceptance of the fiscal audit, the Regional Inspector
        General for Audit (RIGA) shall furnish a copy of the audit
        report to the Field Office. The HMS and the Financial
        Management Analyst (FMA) shall review the audit report to
        determine if the audited costs agree with the costs shown
*            on the AMCC. If the audited AMCC indicates that there are
        still excess funds, the PHA shall remit the excess funds,
        directed by the Field Office. If the audited AMCC
        discloses unauthorized expenditures, the PHA shall take
        such corrective actions as HUD may direct. After all       *
        audited costs have been reconciled, the HMS shall forward
        the original AMCC to the Director, Housing Management
        Division, for signature, indicating that the AMCC has been
        audited and is correct, and to the Field Office Manager for
        signature, indicating approval.

        a.   Distribution. After signature, the HMS shall arrange
             for the original and copies of the approved AMCC to be
             distributed as follows:

             (1)   To the PHA, one copy for records purposes.

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             (2)   To the Regional or Chief Counsel, one copy for
                   attachment to the ACC amendment.

             (3)   To the AHMB files, one copy for records purposes.

             (4)   To the Regional Public Housing Director, one copy
                   for informational purposes, where requested.

             (5)   To the RIGA, one copy for audit and records
                purposes.

*               (6) To the Regional Accounting Division (RAD) or
                Office of Finance and Accounting (OFA), the
                original in accordance with subparagraph c.    *

     b.   For modernization approved before modernization as a
          separate project (before July 1, 1978) the audited and
          approved AMCC shall be attached to the ACC amendment
          and shall be deemed to further amend the ACC, where
          necessary, to reduce the amount of loan authority for
          the modernization to the actual modernization cost.
          No revised Form HUD-5079B, Modernization List (Part
          II), Form HUD-52540, Project Accounting Data (PAD), or
          additional ACC amendment is required. No updates will
          be processed in the Assisted Housing Accounting System
          (AHAS).

     c.   For modernization approved after modernization as a
          separate project (on or after July 1, 1978), the
          audited and approved AMCC shall be attached to the ACC
          amendment and shall be deemed to further amend the
          ACC, where necessary, to reduce the amount of the
          Modernization Project to the actual modernization
          cost.

          (1)   Modernization Approved in FFY 1986 and Prior
                Years. Where there is a downward adjustment, the
                Field Office shall prepare a revised Form
                HUD-52540, PAD (11/85 version), showing the
                reduced contract, loan and budget authority
                amounts (refer to paragraph 4-3) and transmit it
                and the original of the audited and approved AMCC
                to the RAD. The RAD will adjust the obligation
                and reservation amounts in AHAS, as it would for
                any other decrease amendment, and then forward
                the AMCC to OFA. Where there is no downward
                adjustment, the Field Office shall forward the
                original of the AMCC directly to OFA. Recaptured
                budget authority will be available for reuse as

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                a capital grant only when reassigned by
                Headquarters.

          (2)   Modernization Approved in FFY 1987 and Subsequent
                Years. Where there is a downward adjustment, the
                Field Office shall prepare a revised Form
                HUD-52541, PAD (2/87 version), showing the
                reduced budget authority amount and transmit the
                PAD and the original of the audited and approved
                AMCC to the RAD. The RAD will adjust the
                obligation and reservation amounts in the Program
                Accounting System (PAS), and then forward the
                AMCC to OFA. Where there is no downward
                  adjustment, the Field Office shall forward the
                  original of the AMCC directly to OFA. Recaptured
*                      budget authority will be available for reuse as a
                  capital grant only when reassigned by           *
                  Headquarters.

12-7.      RECAPTURES AS PART OF FORGIVENESS. The Housing and
        Community Development Reconciliation Amendments of 1985
        (P.L. 99-272) authorize the Secretary to forgive
        outstanding principal and interest on loans made by the
        Secretary to PHAs.

        a.   Forgiveness is limited to loans held by HUD which were
             to be repaid using annual contributions. Forgiveness
             does not extend to debt evidencing financing through
             the sale of bonds, the Federal Financing Bank, or to
             PHA notes to HUD which would not be retired using debt
             service annual contributions, such as preliminary
             loans, administrative loans and portion of notes
             representing excess financing. The Act states that
             the cancellation of principal and interest payments
             shall not affect any other terms and conditions of the
             ACC.

        b.   For modernization approved before modernization as a
             separate project (before July 1, 1978), it is
             unnecessary for the Field Office to send a copy of the
             audited and approved AMCC to RAD or OFA. OFA
             processed recaptures as part of forgiveness
             automatically at the end of FFY 1987.

        c.   For modernization approved after modernization as a
             separate project (on or after July 1, 1978), where
             there is a downward adjustment under paragraph 12-6c,
             the Field Office shall forward the revised PAD and the
             original of the audited and approved AMCC to the RAD.
             The RAD then will forward the original of the audited

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             and approved AMCC to OFA. OFA will process recaptures
             as part of forgiveness automatically at the end of
             each FFY. Where there is no downward adjustment, the
             Field Office shall forward the original of the audited
             and approved AMCC directly to OFA. Upon receipt of
             the AMCC, OFA will determine the amount of excess
             financing (if any), reclassify the amounts of loans
             that represent excess financing (if any), record the
             AMCC amount in AHAS, and process contract and budget
             recaptures as part of forgiveness automatically at the
             end of each FFY.

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